Canadian Economy Flattens in Q1 2015 – Anderson Economic Report

Written by the former Assistant Chief of the Bank of Canada’s research department, Dr. Peter Andersen releases economic reports periodically to inform businesses and executives about trends in the economy. His observations from Q1 of 2015 provide insight into Canadian and international economies which have the greatest impact on Canadian industry. This information is used by some businesses to plan and execute change within their organization, however the views and forecasts represented in this article are that of Dr. Andersen and not Mentor Works Ltd. Andersen focuses on the impact of oil values, the US dollar, the Euro, and developing countries.

Flat Canadian Economy from Lower Oil Values

The deflated oil industry continues to underperform due to various troubles across the sector. Cancelled oil sands projects have reduced production and a stagnant value of crude has put a strain on the big producers throughout Alberta and Saskatchewan. Although employment rates are exceptionally high throughout these provinces, it is expected to be unsustainable. By the end of 2015, energy exports will drop in value by 20% which will be enough to put a halt on hiring and potentially force layoffs until values begin to rise again.

Non-energy exports will continue to see gradual growth for the coming months. Ontario, British Columbia, and Quebec will provide the bulk of growth, while a lower Canadian dollar will also aid at softening the blow of poor energy production. A lower dollar valuation will give a boost to manufacturing and is hoped to bring in more capital investment from foreign companies, thus providing more future growth potential for the country.

Positive Outlook for United States Economy, Dollar

Likewise, the decline of oil production has minimized growth in the American economy during the first quarter. A backlog of wells which have been drilled but are incomplete and unable to produce oil will become useful through the year. When the price of oil reaches US $65/barrel, many of these projects will resume so that oil production can ramp up and provide a greater contribution to the economy.

Higher worker wages, an increase in hours worked, and jobless claims at a 15-year low will pave the way towards a long period of American economic expansion. Less federal stimulus will be needed to artificially boost businesses, so this could be the start of a real upswing in the American economy.

European Growth, India’s Push to Surpass China

After many struggles in the recent years, it appears as though the European Central Bank’s policies for economic reform and strengthening are working. Within the EA-19, industrial production rates have reached a 4-year high, partially aided by currency depreciation. While this production may drop off as the valuation of currency becomes stronger, it has successfully added to the economic well-being of the EA-19 nations and will eventually bring the value of the Euro back up.

India continues to make a push to become the world’s production powerhouse. They are projected to surpass China as the global growth leader and will continue to grow into the foreseeable future.

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